Why Greece failed

How
different is Greece? The beginning of wisdom about the current Greek crisis is
to recognize that it is fundamentally political, and that it has been long in
the making. Greece’s failure is the outcome of a long process during which
populism prevailed over liberalism and became hegemonic in society.

The 182nd Prime Minister of Greece George Papandreou with the former Prime Minister Kostas Karamanlis in the ceremony for the official handover at the Maximos Mansion in Athens, Greece, 6 October 2009. Wikimedia commons. Some rights reserved.

Cultural
theories relate the fate of states to culture, and more particularly to its
geographical and historical determinants. Countries with hot climates (such as
those in Africa), situated in dangerous areas (the Middle East or the Balkans,
for instance), or with adverse histories (experiences of having been colonized
or engulfed by civil war, let us say) are more likely to remain poor and to
fail politically than countries that enjoy more temperate climes, safer
neighbourhoods, and happier pasts. Cultural interpretations of Greece’s current
political maladies (including the common perception of Greeks as lazy) are not
in short supply.

Institutional
theories, by contrast, hold that nations stand or fall by their
institutions—strong and resilient institutions mean that major political and
economic crises can be withstood, while weak institutions crumple and fold
under history’s harsh test. Daron Acemoglu and James Robinson, for instance,
have recently advanced a comprehensive institutional theory of “why nations
fail” that attributes this to a lack of political pluralism and therefore of
inclusive economic institutions. “Rich nations are rich,” these authors argue,
“because they managed to create inclusive institutions.” In contrast, the most
common reason for the failure of nations today is the presence of extractive
institutions, as these “keep poor countries poor and prevent them from
embarking on a path to economic growth.”

The Greek
case, however, puts both conventional theories to a stern test. Cultural
theories fall short of explaining how post-1974 Greece succeeded in building a
pluralist political regime despite its ostensibly adverse geographical,
historical, and cultural conditioning. And institutional theories are at pains
to account for Greece’s recent failure, which was not caused by a lack of
inclusive political and economic institutions but rather happened in spite
of them.

Greece,
especially when compared to other similarly debt-ridden European countries such
as Spain, Italy, Portugal, or Ireland, is uniquely puzzling in at least two
ways. It is both the only country in Europe that saw its state fail in key
areas during the recent economic crisis, and the European country that has
proven the most resistant to reform. To be credible, therefore, any explanation
of the Greek puzzle must account for both the causes that led to state failure and
the reasons for the exceptionally strong resistance to reforms aimed at restoring
to Greece a sustainable state and the ability to compete in global markets.

To this
end, I will attempt to synthesize the cultural and institutional theories in
order to propose a unified explanation that focuses on the role played by
political mechanisms. The beginning of wisdom about the current Greek crisis is
to recognize that it is fundamentally political, and that it has been long in
the making. Greece’s failure is the outcome of a long process during which
populism prevailed over liberalism and became hegemonic in society. I herein
understand populism simply as democratic illiberalism and view it as the
polar opposite of political liberalism. It will be shown that, after having
reached power in 1981, populism permeated Greek politics and produced what I
will call a “populist democracy,” which in turn required two mechanisms: a
state bent on handing out political rents to practically every member of
society; and a party system built to ensure the distribution of these rents in
an orderly and democratic way—that is, by turns rather than in one go.
Taken together, these two mechanisms led to a fine coordination of aims between
the political class and the vast majority of Greeks, enabling both sides to
exploit the state and its resources in a seemingly non–zero-sum fashion.

Populism triumphant

Andreas
Papandreou (1919–96) rose to power by attacking the liberal foundations of a fledgling
postauthoritarian Greek democracy from the left, questioning its legitimacy and
rejecting its goals.

Whereas Karamanlis,
who explicitly acknowledged the multiplicity of conflicts in society, had
emphasized moderation and actively pursued political consensus, Papandreou
introduced populism in its purest form. A master at politicizing resentment, he
offered the Greek people a wholly new symbolic master narrative according to
which society was divided between two inherently antagonistic groups—an
exploiting “establishment,” both domestic and foreign, and the pure “people”
standing in opposition to it. Largely as a result of this division, Greek
politics assumed a highly confrontational style and also turned distinctly
majoritarian. It was to remain so for more than three decades.

In the
1981 national elections, PASOK, the party that Papandreou had founded only seven years
earlier, won by a landslide and formed its first single-party government. The
new government, abandoning Karamanlis’s strategy of state-led growth and now
also receiving generous EU handouts, undertook state-directed redistribution.
At the same time, political polarization, rather than subsiding, became more
intense. By portraying Greek society as torn between the “forces of light”
(meaning PASOK voters and sympathizers) and the “forces of darkness” (meaning
opposition voters), the new government used the state and its resources to
satisfy its own electoral constituencies and reap further electoral gains,
while passing the cost on to the whole of society.

In 1990,
after almost a decade of populism, New Democracy returned to office under the
leadership of liberal politician Constantine Mitsotakis. Trying to reverse
previous practices, the new government moved swiftly to reinvigorate Greece’s
economy, reinforce its political institutions, and repair strained relations
with Washington and the European allies. With regard to the economy, the ND
government made preparing the country for the European single market the top
priority, and accordingly moved to cut public spending and reform the civil
service. A privatization agenda was adopted with the same goal in mind. The
opposition’s intense resistance made the proposed structural reforms and policy
alternatives hard to implement, however, and in 1993 the ND government
collapsed, opening the way for Papandreou and PASOK to return to power.

After its
dismal, defeat-capped spell in power in the early 1990s, ND faced a choice:
Should it cling to liberalism or learn to play the game of vote-catching
populism? As it turned out, the Mitsotakis government had been liberalism’s
feeble last hurrah. Populism’s strong pull soon made it a permanent feature of
Greek politics. By the mid-1990s, ND had rebranded itself as a “people’s party”
and thereafter tried to outbid PASOK’s already excessive promises. This trend
became particularly pronounced when Costas Karamanlis, the founder’s nephew,
served as ND’s leader between 1997 and 2009. He expelled the most prominent
proponents of political liberalism from the party and took to spouting rhetoric
that made him sound more like Andreas Papandreou than like his own uncle and
mentor.

Indeed,
the failure to make badly needed changes in such key areas as pensions and
health (under PASOK) and education (under ND) became the most striking feature
of all governments in Greece’s populist democracy. Not only were these
reforms opposed by strong interests in society and never fully implemented, but
the politicians who sought to introduce them were punished at the polls, and
some retired from public life. Reformism stood exposed as a political loser.

Thus for
three decades—from PASOK’s rise to power under Andreas Papandreou in 1981 to
the resignation of his son, Prime Minister George Papandreou, to allow a
caretaker government to deal with the debt crisis in 2011—Greece’s two major
parties had been able to hold office alternately, in most cases commanding
ample parliamentary majorities: PASOK ruled during 1981–89, 1993–2004, and
2009–11; ND enjoyed office during 1990–93 and 2004–2009. The stillborn
coalition governments that formed during the extraordinary circumstances of the
short period extending from June 1989 to April 1990 (and that also included the
Greek Communist Party) stand as an unusual parenthesis within the two major
parties’ consistent alternation in power.

During
those decades, Greece developed as a populist democracy, a democratic subtype
in which the party in government and (at least) the major opposition party both
are populist. What were the nuts and bolts of this system, and how did it
last for such a long time? In order to answer these questions, we must first
understand the two chief mechanisms that made populist democracy feasible: the
redistributive capacity of the increasingly large Greek state and the
polarizing mechanics of the Greek party system.

Political patronage, Greek-style

In the
view of many, political patronage is the main cause of the Greek crisis. In mainstream
theory, patronage is seen as a linkage between politicians and citizens. Such
patron-client ties are “based on direct material
inducements targeted to individuals and small groups of citizens whom
politicians know to be highly responsive to such side-payments and willing to
surrender their vote for the right price.” In
this understanding, patronage has two features: first, a distribution of
state-related benefits (or political rents) to specifically targeted social
groups; and second, the material character of such inducements. Greece’s
populist democracy, however, exhibited a variant of patronage whose features
are notably different from those recognized by mainstream theory.

The first Greek particularity was that rents and other
inducements or entitlements were not only material, but also included benefits
such as widespread de facto immunity from the law. The second difference is
related to the nature of populist democracy itself: Inducements were still
targeted at specific groups but, since society had been divided into two
irreconcilable parts represented by parties regularly alternating in power, all
citizens could reasonably expect to gain from patronage once their own
party won elections.

Overall, Greek society became the recipient of three types of
state-related benefits: real incomes (such as salaries and pensions) derived
from classical patronage functions; privileged protection against market risks;
and impunity from the law.

For
several decades, then, practically every Greek could reap rents from the state.
The existence of such a varied array of rent-gathering mechanisms had a common
effect on the Greek mindset, as “almost all Greeks, from large business owners
to small landowners on islands and to municipal clerks in villages, [came to]
believe it is natural to have some income which derives neither from work nor
from risking capital.”
Still, given the finite nature of state-related resources, there
needed to be a way of distributing them in a prudent and politically
sustainable way. This brings us to the second mechanism that made populist
democracy workable for a time—the party system.

Polarized bipartism

The 1981
election spawned an unusual party system that combined the format of two-party
politics with the mechanics of polarized pluralism, which I will call
“polarized bipartism.” It served to keep society divided into two conflicting
parts, each represented by a major party. The regular alternation in power of
the two rival parties made possible the distribution of political rents to
society in an orderly, democratic, and economical way.

Interestingly
enough, partisan polarization in Greece has not been primarily ideological, as
happens in pluralist systems with multiple cleavages (such as differences of
class, language, region, or religion, which often create deep social rifts) and
a large spread of public opinion. Greek polarization has instead been strategic
polarization, pursued deliberately by pragmatic parties competing to grab the
state single-handedly and control its resources. To this purpose, each party
had an incentive to step up polarization as it tried to win the non-ideological,
ambivalent voters in the middle through various inducements. This not only
forged in-group solidarity; it also increased the insecurity of political
opposition and, therefore, the chances of its fragmentation.

Not long
after its transition to democracy and under the pressure of rising populism,
Greece saw its party system go from moderate multi-partism to an essentially
two-party affair. From
1981 until the 2009 elections, the Greek two-party system continued to
function—on one level at least—as such systems normally do: There were two
major parties, each of which found itself in a position to compete for an
absolute majority of seats in Parliament. One of the two would win a parliamentary
majority large enough to allow that party to govern alone. Most importantly,
the two parties regularly alternated in power.

Despite
its two-party format, however, Greece’s party system displayed
distinctly polarizing mechanics, which enabled political actors to
portray society as being divided into two political camps, each resembling a
close-knit majoritarian community given to denying its opponents’ legitimacy.
As a result, the centre—in the sense both of centrist parties and of moderate
liberal ideological and policy positions—fell into decay. What was left was a
polarized competition between rival sets of populist forces that vied against
each other to represent “the people.” Unlike classic bipartism in liberal
democracy, where a variety of cleavages intersect to produce a multidimensional
voting space, the type of bipartism found in populist democracy tends to reduce
party competition to a single dimension. Politics, in other words, becomes a
confrontation between a majority (the masses, the people, the underprivileged,
the poor) and some minority (the elite, the establishment, the privileged, the
rich). Given this simple, albeit symbolically powerful, ordering of society
along a single dimension, as well as the strong majoritarian impulses that are
typical of populism-permeated systems, both major parties in populist
democracies have every incentive to play up rather than soft-pedal
polarization. In such cases, as issue-based voting becomes secondary at best,
parties strive to vilify their opponents, outbid them, or both. Accordingly, as
the average voter turns to the highest bidder, societies tend to cluster around
opposed poles; as the majority of the people cleave to one pole or the other,
the middle ground is lost and the median voter becomes a rare phenomenon.

The
problem, however, is that when politics is polarized, bipartism does not work.
In such a system, in which bipartism fails to produce a political society
characterized by moderation and what John Rawls famously called “overlapping
consensus,” polarization breeds political instability and the system becomes
dysfunctional. In this case “we should expect the parties to become more than
two and another type of party system” to emerge. And indeed, this is exactly what
happened in Greece during the successive elections of May and June 2012, when bipartism
collapsed and gave way to extreme pluralism, with once-marginal parties such as
the left-wing Syriza coalition and the right-wing Golden Dawn gaining
significant (or in the case of Syriza, even major) shares of seats in
Parliament.

A planned “tragedy of the commons”

As the
crisis raged, former PASOK deputy premier Theodoros Pangalos sparked
controversy by presenting it as a typical “tragedy of the commons” in which
selfish and reckless individuals chose personal gain over societal well-being.
As he told Parliament on 21 September 2010, “We [Greeks] all ate it up together
following a practice of wretchedness, bribery, and squandering of public
money.” The problem with this and similar interpretations, however, is that the
Greek political system is not an unmanaged commons in which uncoordinated
individuals try to increase the marginal utility of public goods to themselves.
Instead, the Greek crisis has been the result of a perfectly institutionalized
political system that was built with intent and design, and remained functional
for a long time because of a high level of co- ordination that was achieved
between the country’s political class and the vast majority of Greeks.

The
crisis in Greece has been the outcome of its particular system of populist
democracy—that is, a democracy in which both the party in office and its main
rival are populist. Two mechanisms made this system endure for nearly three
decades. The first was a state intent on distributing political rents as widely
as possible; the second was a party system ensuring the widespread delivery of
state benefits via party rotation in office. With two strong populist parties
regularly alternating in power and being in control of a generous state keen to
distribute political rents, voters learned that the state was up for grabs and
that it was better to associate with the state through party contacts rather
than venture into the market through competition. They also learned through
electoral iteration that even if one’s party lost at the polls, it was likely
to return to power next time around. Politicians learned that there was no
mileage in reformism—society would only penalize them for it at the ballot box.
Based on this widely shared understanding, Greece’s populist democracy worked
relatively well until the crisis broke out, instantly revealing that the Greek
state had run out of resources. From there, it was only a matter of time until
the 2012 elections confirmed the collapse of Greece’s populist democratic
system.

The
current financial and economic crisis has led to the demolition of the two
mechanisms that, for decades, had supported Greece’s populist democracy. On the
one hand, the Greek state, now short of external funds and with its creditors
hounding it to apply harsh austerity measures, no longer has rents to hand out
to society. On the other hand, the two-party system that was vital to the
orderly distribution of rents lies shattered and, for the time being at least,
has given way to an extremely polarized form of multipartism.

Also gone
along with these two mechanisms, of course, is the old sociopolitical contract
on the basis of which voters and politicians co- ordinated their actions,
individually benefiting from the state at the ex- pense of the public good.
Quite clearly, then, Greece’s political leader- ship badly needs to forge a
new, shared social contract. It must provide the mechanisms that will restore
the liberalism which populism put to rout—a liberalism that must return if
Greece is to have a better future and a safe place within the European fold.

This essay is adapted from
Takis Pappas’s “Why Greece Failed,” which appears in the April 2013 issue of
the Journal of Democracy. The full essay is available here.

About the author

Takis S. Pappas is a Visiting Professor at the Central European
University, and has recently authored Populism
and Crisis Politics in Greece (Palgrave 2014) and co-authored European Populism in the Shadow of the Great
Recession (ECPR Press 2015).

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